Archives for September 2007

Governor Mark Sanford – Disability Ratings

Our hats are off to Governor Mark Sanford. For quite some time, South Carolina has made setting reserves on files with a permanent disability rating almost impossible. The Workers Comp Insurance Commissioners could just assign a very subjective permanency rating to a Workers Comp file.

The Workers Comp adjusters in South Carolina have had a tough time setting reserves on files, as a permanency rating could vary as much as 300-400%. The informal conference that set the final rating was called a viewing.

Reigning in these arbitrary assignments of permanency will enable the Workers Compensation file reserves to be more easily estimated. In our file reviews, the adjusters have always commented that they cannot assign a low rating % to the reserves, as the Commissioners can just throw out a number and make the insurance carrier of self-insured just pay up or appeal the rating.

The South Carolina workers comp adjusters endure a Catch 22 situation on almost every disability rating reserve. Many years ago, the arbitrary ratings astounded me when I adjuster South Carolina Workers Compensation claims. The disability rating consisted of one of many peculiarities to the South Carolina Work Comp system. The other was having to file a pile of status forms. South Carolina required a status form filing every 60 days or a fine letter was automatically sent to the adjusting staff – usually the Claims VP – ouch!

There is no consistency on the permanency ratings. In South Carolina they are arbitrary and at times, seem almost random. This can be frustrating if an employer wants justification for a file reserve when Permanent Partial disability is an issue.

We shall see how the ratings will be changed now that Governor Sanford has stepped in to save companies in South Carolina millions Workers Compensation premiums.

Work Comp Subrogation Additional Concern

Work Comp subrogation has a kind of quirky standard definition. To me, it is the possibility of another party having to share the monetary responsibility of an insured incident or accident..

I give the example in my manual of a company salesperson on sales calls being hit by another car in the back bumper and sustaining Workers Compensation injuries. The driver of the other car should pay for the damages sustained and reimburse the Workers Comp carrier.

We usually see two errors being made during our file reviews:

We often see the subrogation funds being added back into the file after the file has been closed. However, the amounts reported to NCCI may not change. The funds could greatly affect a company’s Workers Compensation E-Mod.

The Workers Comp adjuster may not have enough time to pursue subrogation or may take a small % of the liability settlement.

Both instances are E-Mod killers. As I pointed out in my manual, there are 13 basic functions of a claims adjuster. This area is one of the lower priority tasks.

The employer will likely have to monitor the subrogation follow up in most situations. There are many articles on how to track it in this blog.

Temporary Agencies vs. Workers Comp

Temporary agencies or temp agencies have long affected the WC rating system. Another of the major concerns when I spoke at the NC Mid-State Safety Council quarterly meeting was temporary agencies. The three main concerns I have with temp agencies are:

In the past temporary agencies would open and close every three years to avoid an experience rating or E-Mod calculation. This harms the way the Workers Comp system is supposed to work. By not having an E-Mod besides 1.0, the temporary agencies that had a horrendous claims history paid no more than the safer ones.

If the temps working for you do not have Workers Comp coverage due to the temp agency lapsing their policy, the TEMP EMPLOYEES WILL BE YOUR RESPONSIBILITY due to the ladder of insurance – see last post.

You may not know the policy/cert has lapsed or had voids in coverage. There is no mechanism to inform you of the lapse.

Employers have unwittingly been on the hook for major claims, as the temps are now covered by their policy. One way to upset an insurance carrier is to have coverage for employees that were not counted in your payroll. Your company may likely face a cancellation in this situation.

Workers Comp Concern = Three Areas

I have been out of action for about a week, as this is the end of our tax season. There were three areas that raised the most concern in my presentation at the North Carolina Mid State Safety Council. I will go over each of them over the next few days. Those were:

Subcontractors

Temporary Agencies

Subrogation

The first area, Subcontractors, has three areas of concern from what I have seen –

The Ladder of Workers Comp Insurance – Workers Compensation courts will move up the ladder of contractors until a company is found to have insurance. If your subcontractor does not have insurance for their employees, you may be stuck for a claim. If your subcontractor subcontracts out their work, if the 2nd level subcontractor and your primary subcontractor does not have insurance coverage, then your company may have to pay benefits to a employee you have never met. This happens more than one might think. Workers Compensation Judges are going to find the responsible party by going up the ladder of insurance until coverage for the injured employee is located.

Certificates of Insurance – A subcontractor may provide you with a Workers Comp Certificate of Insurance. Many companies just take the Certificate of Insurance on its face value. If for some reason the cert is no good, you may be stuck with a claim.

Who is a subcontractor? The IRS has some great rules on who is a subcontractor and who is not. You may want to review them for your Workers Comp subcontractor situation. The link is here This is a good place to start. Each state’s Workers Comp laws has a set of rules for contractors. The IRS website is a good overall guide.

Workers Compensation Loss Prevention Keeps Going After The Accident

Workers Compensation Loss Prevention – where does it end and begin?

As I was reviewing my notes for my presentation tomorrow to the North Carolina Mid State Safety Council quarterly meeting, I noticed one common theme. Loss prevention does not stop when the accident happens. It is instead an ongoing process, especially soon after an incident.

From my viewpoint, a Loss Prevention/Safety Officer should be heavily involved in the reporting of the injury to the insurance carrier and in the initial physician referral. Safety personnel are often judged by the E-Mod (see previous posts) that is produced each year. However, the Safety personnel may not have control over where the injured employee is sent for medical treatment. The safety department has to be involved, as the tone is set for the complete claim within the first 48 hours of a Workers’ Comp claim.

I have heard safety personnel say that their job ends once the accident happens. This could not be further from the truth. I have coined the phrase post-accident safety. I recommend the safety departments become more heavily involved, as you are judged by the E-Mod as a testament to your safety program. Ignoring what happens after an accident/incident can affect your performance greatly.

West Virginia Workers Compensation Conference Advisory Rates

From what I could tell, the Old Fund did not keep records that were directly usable by NCCI, so NCCI took 7 states that were similar to WV (not including coal mines) and used them to come up with the advisory rates. The states were:
a. AL
b. KY
c. MD
d. NC
e. SC
f. TN
g. VA

It will be six years before NCCI has data they can fully use to calculate advisory rates.

The Supreme Court decision Mandible(?) – where the employee can sue outside of WC under Part B of the insurance policy if the employer intentionally harms the employee. This was a large concern to the carriers as the WV Supreme Court had been very liberal with the “intentional harm” part of the Mandible(?) decision. Part B allows an employee to sue the employer/carrier in a manner very similar to a regular insurance claim with no limits. The WV DOI people there had differing opinions whether this was excluded from a WC policy or not. If this is not excluded, some carriers may not come into the state on 7/1/08.

The PEO’s that may come into the state was of a concern to me. As so many of them are not doing well or have been brought up on charges of corruption, the regulations need to be tightened as much as possible. PEO’s can usually offer discounted rates, but at what final cost if they are allowed to operate as freely as has been the case in many other states?

Overall, the WV Department of Insurance and NCCI did a great job, as they are in a very difficult position with West Virginia not ever having an open market for Workers’ Comp.

Tuesday, September 11, I will be speaking at the North Carolina Mid State Safety Council lunch meeting. The title of my presentation is “The Five ASAP Ways To Cut Your Workers Compensation Claims.”

158 Firms Register for West Virginia Workers Comp Conference
by George Hohmann
Daily Mail business editor

More than 150 people — including representatives of some of the nation’s largest workers’ compensation insurers — have signed up for a conference to learn how they can enter West Virginia’s workers’ comp insurance market.Pre-registration for Wednesday’s conference at the Marriott is a positive indication that there’s interest in writing workers’ comp insurance in West Virginia when the market opens to competition next July, Insurance Commissioner Jane Cline said today.”We’re pleased with the response and turnout because it does represent a number of companies that write workers’ compensation insurance across the country as well as local people who have an interest in the transition and work with the insurance industry,” Cline said.”We’ve met with a number of national carriers and continue to meet with the trade associations that represent a majority of carriers that write workers’ compensation.”On Jan. 1, 2006, West Virginia transitioned workers’ compensation insurance from a state-run monopoly to a private company, BrickStreet Mutual Insurance Co.

BrickStreet has been the sole provider of workers’ comp insurance in West Virginia since the transition and will remain the sole provider until July 1, 2008.

As of Friday, a total of 158 people had registered for Wednesday’s conference. Many represent large national insurance companies, including AIG, Erie, Liberty Mutual, State Farm, Travelers, Wausau, Westfield and Zurich.

Local insurance agents, lawyers, consultants, data reporting forms, West Virginia legislators and representatives of the state Attorney General have also registered.

Last week Cline pointed out that workers’ comp premiums have declined an aggregate of 27 percent since West Virginia’s transition to private insurance. BrickStreet has reported it made a $25.2 million profit in the first six months of this year, continuing the dramatic financial turnaround begun since the transition.
James Moore, president of J&L Risk Management Consultants of Raleigh, N.C., is one of the conference pre-registrants. He said last month, “Any insurance carrier looking to break into the market will have to build off the BrickStreet model. If the big carriers — Liberty Mutual, Travelers, etc. — see the model as profitable, they will enter the market, which will be very healthy for West Virginia businesses. Competition creates a pressure to lower prices and increase service.

“If they do not accept the model, they will not enter the market,” Moore said. “If no carriers enter the market, that would be very unhealthy for the business environment in West Virginia.”
Cline’s office and the National Council on Compensation Insurance, also known as NCCI, are hosting the conference. The state Insurance Commissioner regulates insurance companies. NCCI is West Virginia’s rating and statistical agent.
The conference will be from 9 a.m. to 3:30 p.m.

Additional Workers Compensation Classification Codes Errors

The main area I wanted to cover here today, which should have been covered last Friday, is how to tell if your Classification Codes are wrong. This is a very tough one, but here are some observations that we had while reviewing Workers Comp policies:

You have NOC in your Classification Code

The Classification Code is not what you do in your business.

The NCCI or State Rating Bureau has never inspected your business

Sometimes the Class Codes can be wrong if you have just been inspected (Catch 22)

Along with the abrupt change, you receive a very large Workers Comp premium bill

You have two or more very distinct businesses that are being classified in one “umbrella” class code

Your competitors are being classified differently

The #1 way to know is that you or someone in your company has a gut feeling that your Class Code is wrong, or there is something that is wrong overall with your Workers Comp insurance policy – that is when we receive most of our calls and emails, and gut feelings are right about 80% – 90% of the time.

I will add to this list as time permits. Those are the ones that I can remember off the top of my head. I am on the road this week traveling to the West Virginia NCCI Conference.

West Virginia has come a long way from a monopolistic state for Workers Compensation to a full open market. Brickstreet has been the interim monopolistic private carrier for the last two years, and will be the carrier until July 1, 2008.

Brickstreet will be the carrier for some of the West Virginia state agencies until July 1, 2010.

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About Me

James J Moore
Raleigh, NC, United States

James founded a Workers' Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L's mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers' Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James's educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.